Exhibit 99.1
[1 First BanCorp Logo]
Alan Cohen
Senior Vice President, Marketing and Public Relations
Office (787) 729-8256
alan.cohen@firstbankpr.com
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FIRST BANCORP PROVIDES REGULATORY, FINANCIAL AND OPERATIONAL UPDATE
o First BanCorp and FirstBank enter into Consent Orders with Banking
Regulators Relating to Mortgage Transactions with Doral Financial
Corporation and R&G Financial Corporation
o FirstBank Returns to Well-Capitalized Status
o First BanCorp Announces Payment of Dividends and Provides Selected
Operational Results
o Audit Committee Reaches Conclusion Relating to Pass-Through Trust
Certificates with R&G Premier Bank
o First BanCorp Announces Late 2005 Annual Report Filing
San Juan, Puerto Rico, March 17, 2006 -- First BanCorp (NYSE:FBP) today
provided an update on several regulatory, operational and financial matters.
First BanCorp announced that it has agreed with the Board of Governors of the
Federal Reserve System to a consent Order in which First BanCorp consents to a
Cease and Desist Order. The consent Order is a result of certain concerns of
banking regulators relating to the incorrect accounting for and documentation of
mortgage-related transactions with Doral Financial Corporation and R&G Financial
Corporation in the absence of current financial statements. As previously
announced in December 2005, First BanCorp initially reported those transactions
as purchases of mortgage loans before determining that they should have been
accounted for as secured loans to the financial institutions because they were
not true sales. First BanCorp also announced that its subsidiary, FirstBank, has
entered into similar agreements with the FDIC and the Commissioner of Financial
Institutions of the Commonwealth of Puerto Rico. The agreements, signed by all
parties involved, do not impose any restrictions on First BanCorp's day-to-day
banking and lending activities.
The consent Orders require First BanCorp and FirstBank to take various
affirmative actions, including engaging an independent consultant to review
mortgage portfolios, finalizing the documentation of the loans with Doral and
R&G resulting from the need to classify the mortgage-related transactions as
secured loans, submitting capital and liquidity contingency plans, providing
notice prior to the incurring of additional debt or restructuring or
repurchasing debt, obtaining approval prior to purchasing or redeeming stock,
filing corrected regulatory reports upon completion of the restatement of
financial statements and obtaining regulatory approval prior to paying dividends
after those payable in March. First BanCorp's management believes, based upon
its views as to First BanCorp's future profitability, that the terms of the
dividend restrictions included in the orders will enable the bank regulators to
permit First BanCorp's payment of dividends to its security holders in the
future. However, no assurance can be given that either or both of the regulators
will approve future dividend payments.
"We support our regulators' efforts in working with us to maintain the
continued strength of First BanCorp," said Luis Beauchamp, First BanCorp
President and CEO. "We will continue to work with the appropriate agencies to
completely address all regulatory concerns, and we continue to take our own
actions to rectify these matters."
Beauchamp continued, "We are working diligently with Doral, R&G and
other financial institutions to reduce the amount of our secured loans to Doral
and R&G through warehousing facilities for a substantial portion of the mortgage
portfolio, sale of mortgages through a securitization process and the sale of
participations in the loans. All of these options are intended to reduce the
outstanding balance of our loans to Doral and R&G that are secured by
mortgages," added Beauchamp.
During the 4th, quarter the bank received a partial repayment of $137
million by R&G Financial of its secured commercial loans. Even though there is
no guarantee, the Corporation expects that future partial repayments will
continue.
"The consent Orders do not impose any restrictions on our day-to-day
banking and lending activities; therefore, we continue implementing our business
strategy," explained Beauchamp.
RETURN TO THE WELL-CAPITALIZED STATUS
The Corporation announced that FirstBank's Call Report filed for the
fourth quarter of 2005 shows that, as of December 31, 2005, FirstBank had
returned to the well-capitalized level, within the meaning established by the
FDIC. First BanCorp made a capital contribution to FirstBank of $110 million at
the end of 2005. Also, the partial repayment made by R&G in the fourth quarter
of 2005 released capital allocated to the loans secured by the mortgage loans to
R&G, thus contributing to the well-capitalized level.
PAYMENT OF DIVIDENDS
The Board of Directors approved First BanCorp's 43rd consecutive
quarterly dividend payment on its common shares, declaring a first quarter 2006
dividend of $0.07 per share. The dividend on the common stock is payable on
March 31, 2006, to stockholders of record as of March 24, 2006. The Board of
Directors also approved the corresponding dividend payments on its preferred
stock, Series A through E, and the Trust Preferred I & II.
SELECTED OPERATIONAL RESULTS
First BanCorp provided selected unaudited loan data as of December 31,
2005. The Corporation reported that total loans receivable before allowance for
loan losses were approximately $12.7 billion as of December 31, 2005. Total
loans receivable before allowance for loan losses were approximately $9.7
billion as of December 31, 2004. The nearly $3.0 billion increase in loans
receivable as of December 31, 2005, was primarily driven by an increase of
approximately $1.4 billion in commercial and construction loans, an increase of
approximately $360 million in consumer and automobile loans and an increase of
approximately $1.3 billion in residential real estate loans. The origination of
residential real estate loans was driven by FirstMortgage, the mortgage
subsidiary of FirstBank. First BanCorp did not make any bulk purchases of
mortgage loans after the first quarter of 2005.
AUDIT COMMITTEE REACHES CONCLUSION RELATING TO PASS-THROUGH TRUST CERTIFICATES
The Corporation's Audit Committee concluded that all of the
transactions related to the pass-through trust certificates from R&G Premier
Bank, involving approximately $220 million of mortgages represented by the
certificates, were not true sales as a legal matter and for accounting purposes.
The pass-through trust certificates are now classified as secured commercial
loans. While the revised classification does not require additional regulatory
capital, management has recorded loan loss reserves in the amount of
approximately $110 thousand relating to these loans. Prior to the revised
classification, the pass-through certificates were considered investment
securities and, as such, did not require loan loss reserves.
In addition, the Audit Committee's review of mortgage-related
transactions, which has been described in the Corporation's prior press
releases, is nearing completion. "We are pleased with the progress of the Audit
Committee's review and continue to be committed to stringent accounting and
internal control procedures," said Beauchamp. "We are happy to put these issues
behind us, while maintaining our focus on our primary business."
LATE FORM 10-K FILING UPDATE
First BanCorp also announced that it did not file its annual report on
Form 10-K for the fiscal year ended December 31, 2005 with the Securities and
Exchange Commission by the required filing date of March 16, 2006. First BanCorp
is in the process of preparing restated financial statements to correct the
accounting for the mortgage-related transactions with Doral and R&G and for the
interest rate swaps that it uses to hedge the interest rate risk inherent in its
brokered certificates of deposit and medium term notes. In addition, the
restatement may also address other accounting matters identified as part of the
on-going restatement process. First BanCorp intends to complete the restatement
process and file restated financial statements with the Securities and Exchange
Commission in the summer of 2006. It expects to file the 2005 annual report on
Form 10-K thereafter. The late 10-K filing requires the postponement of the
shareholder's meeting for the year 2005 until further notice.
ABOUT FIRST BANCORP
First BanCorp is the parent corporation of FirstBank Puerto Rico, a
state chartered commercial bank with operations in Puerto Rico, the Virgin
Islands and Florida; of FirstBank Insurance Agency; and of Ponce General
Corporation. First BanCorp, FirstBank Puerto Rico and FirstBank Florida,
formerly UniBank, the thrift subsidiary of Ponce General, all operate within
U.S. banking laws and regulations. The Corporation operates a total of 139
financial services facilities throughout Puerto Rico, the U.S. and British
Virgin Islands, and Florida. Among the subsidiaries of FirstBank Puerto Rico are
Money Express, a finance company; First Leasing and Car Rental, a car and truck
rental leasing company; and FirstMortgage, a mortgage origination company. In
the U.S. Virgin Islands, FirstBank operates First Insurance VI, an insurance
agency; First Trade, Inc., a foreign corporation management company; and First
Express, a small loan company. First BanCorp's common and preferred shares trade
on the New York Stock Exchange, under the symbols FBP, FBPPrA, FBPPrB, FBPPrC,
FBPPrD and FBPPrE.
SAFE HARBOR
This press release may contain certain "forward-looking statements"
concerning the Corporation's economic future performance. The words or phrases
"expect," "anticipate," "look forward," "should," "believes" and similar
expressions are meant to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
The Corporation wishes to caution readers not to place undue reliance
on any such "forward-looking statements," which speak only as of the date made
and to advise readers that various factors, including the impact of the consent
Orders on the Corporation's future operations and results, its ability to issue
brokered certificates of deposit, its liquidity, the results of the
Corporation's continuing review of the accounting judgments reflected in its
historical financial statements, the impact of the announced restatement on the
Corporation's customers and lenders, the ability to fund operations, changes in
the interest rate environment, including the impact of such changes on the
accounting for interest rate swaps, which could adversely affect FirstBank's
capital status, regional and national economic conditions, competitive and
regulatory factors and legislative changes, could affect the Corporation's
financial performance
and could cause the Corporation's actual results for future periods to differ
materially from those anticipated or projected.
The Corporation does not undertake, and specifically disclaims any
obligation, to update any "forward-looking statements" to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
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